An indicator or HR metric is a quantitative or qualitative factor or variable that offers a direct, simple,

unique and reliable signal or means to measure achievements; reflect changes connected to an
intervention, project, activity or task; or help assess the performance.

In the context of business or human resources (HR), indicators are an extraordinarily useful way to
measure all important elements of an organization's performance. Indicators provide information that
leaders, managers, teams, people and those who support them can use to make decisions and take
actions to improve them.

Generally speaking, in the context of business operations, indicators can be classified into two broad
categories: leading and lagging indicators.

Leading indicators are proactive, predictive measures that can signal future events. They give an
organization an idea of what might happen in the future based on current conditions. For example,
employee satisfaction surveys are useful as a leading indicator for employee turnover rates.

Lagging indicators are reactive (ex-post) and occur after the fact. They provide information about past
events and performance, often used to evaluate the success or failure of a project or a strategy. In HR,
lagging indicators include metrics such as the total number of employees who left the company in a
given period.

Both types of indicators are valuable. They offer data-informed insights that can be used to drive
improvements and make evidence-based, data-backed informed decisions.

HR Metrics
Employee Turnover Rate
This is the rate at which employees leave the organization, calculated by dividing the number of
employees who left during a certain period by the average number of employees during that same
period, multiplied by 100. It is a key indicator of employee dissatisfaction, inadequate job fit, or
unsuitable working conditions.

A high turnover rate can lead to higher recruitment and training costs, lower organizational knowledge
and customer satisfaction, and can affect overall productivity and revenue. Furthermore, a high
turnover rate can seriously disrupt operations, lead to institutional knowledge loss, and damage
company culture. Companies with high turnover may struggle to achieve long-term goals due to
constant hiring and training efforts. They may also face reputation issues that discourage potential
customers and high-quality job applicants, hindering business growth and profitability. Implementing
strong retention strategies such as career development programs, mentorship opportunities, and
regular feedback loops can lower turnover.

A Guide to People Analytics: HR Metrics that Matter 2

Creating a positive, inclusive company culture and offering competitive benefits can also contribute to
retention. This is linked to Employee Engagement Score, Employee Satisfaction Index, and Retention
Rate. High engagement and satisfaction often correlate with low turnover and high retention. It can also
be related to Training Cost per Employee if high turnover necessitates frequent training of new hires. A
common mistake is comparing turnover rates across industries without taking into account industry-
specific factors. High turnover in one industry may be normal, whereas in another it might signal
problems. Also, it is important to differentiate between voluntary and involuntary turnover, as they may
reflect different issues.

Employee Turnover Rate is calculated as the percentage of employees who leave an organization during
a specified period. To measure it, divide the number of employees who left during the period by the
average total number of employees during the same period and multiply by 100.

Attrition
This indicator refers to the gradual reduction in the size of an organization's workforce over time due to
natural or voluntary causes, such as resignations, retirements, or employees choosing not to renew their
contracts. Attrition occurs as a result of employees reaching the end of their employment lifecycle,
either due to their own choices or as a natural progression of their career paths. It can be driven by
factors such as employees seeking better opportunities, career advancement, relocation, personal
reasons, or retirement after reaching the appropriate age.

Attrition is considered a passive form of employee separation because it is often not initiated by the
organization but is instead a consequence of the diverse workforce dynamics. Unlike turnover, which
encompasses all types of employee departures, including both voluntary and involuntary separations,
attrition specifically focuses on the voluntary or natural departures of employees.

Managing attrition is an essential aspect of HR strategy, as excessive or uncontrolled attrition can lead
to significant challenges for an organization. High attrition rates can result in increased recruitment
costs, loss of institutional knowledge, decreased productivity, and potential disruptions to team
dynamics. On the other hand, moderate levels of attrition can be a normal part of workforce
management, allowing room for new talent and fresh perspectives.

While attrition and turnover are related, there is a key difference between them. Turnover refers to the
voluntary or involuntary departure of employees from an organization. Turnover is an active process
driven by both employee decisions and employer actions. Attrition, on the other hand, is a subset of
turnover and refers specifically to the voluntary or natural departures of employees from the
organization. It does not include any involuntary separations, such as terminations or layoffs.

Attrition is typically measured as a percentage and is calculated by dividing the number of employees
who have left the organization during a specific period (e.g., a month, quarter, or year) by the average
total number of employees during the same period. The formula for calculating attrition rate is as

A Guide to People Analytics: HR Metrics that Matter 3

follows: Attrition Rate (%) = (Number of Employees Who Left / Average Total Number of Employees) x
100

Cost per Hire

This is the average amount of direct and indirect costs associated with recruiting a new employee. Direct
costs may include advertising expenses, job fair fees, online job board charges, and agency fees. Indirect
costs can include interview time, background checks, and administrative expenses.

By managing this cost, businesses can maximize their recruitment budget, allowing resources to be
invested elsewhere, thereby improving overall efficiency and profitability. Additionally, high costs per
hire can reduce a company's profitability and limit its ability to invest in other crucial areas such as
product development, marketing, or customer service. It may also force the company to hire fewer
employees than needed, leading to understaffing and overwork, both of which can harm productivity,
quality, and customer satisfaction. Streamlining the recruitment process through efficient applicant
tracking systems and focusing on quality over quantity in sourcing strategies can lower recruitment
costs. Building a strong employer brand can also reduce advertising costs by attracting more organic
applicants.

This metric can be linked to Time to Hire as longer hiring processes can lead to higher costs. It may also
impact the Quality of Hire, as rushing the process to save costs might compromise the quality of
candidates hired. This metric can be misunderstood if all relevant costs are not included. For instance,
many companies fail to account for indirect costs such as time spent by employees on hiring activities.
The cost per hire metric is also sometimes used to justify cost-cutting in the recruitment process, which
can lead to lower quality hires.

Cost per Hire is the total cost incurred by an organization to recruit and onboard a new employee. It
includes expenses like advertising, recruitment agency fees, interviews, and training costs. To calculate
it, add up all the hiring costs and divide by the number of hires during a specific period.

Time to Hire (Time to Fill)

This is the duration from the day a job requisition is opened until the offer is accepted by the candidate.
It is influenced by various factors including sourcing methods, efficiency of the recruitment process, and
the complexity of the role.

Reducing the time to hire can lead to cost savings, faster time to productivity, improved candidate
experience, and a better competitive edge in securing top talent. On the flip side, prolonged hiring
processes can leave critical positions vacant, hampering the company's ability to execute strategies and
meet objectives.

A Guide to People Analytics: HR Metrics that Matter 4

It can also lead to lost opportunities as top candidates may accept other offers, weakening the
company's competitive position in the marketplace. Speeding up the recruitment process might involve
investing in training for recruiters, implementing better screening methods, or using AI-powered
recruitment tools. Keeping communication with candidates efficient and timely can also shorten the
hiring timeframe.

Linked to Cost per Hire as mentioned above, but can also impact Employee Engagement Score and
Employee Satisfaction Index as a prolonged hiring process might affect new hire's initial engagement
and satisfaction. A common mistake is prioritizing speed over quality. While a short time to hire can save
costs, if rushed, it can lead to poor hiring decisions.

To measure it, calculate the total number of days taken to hire all new employees during a specific
period and divide by the number of hires.

Quality of Hire
This is an essential HR indicator that measures the effectiveness of an organization's recruitment and
hiring process in attracting and selecting high quality, top talent candidates. Quality of Hire focuses on
assessing the overall fit and performance of new hires to determine how well they meet the
organization's needs and contribute to its success. Evaluating the quality of hire is crucial for measuring
the long-term impact of recruitment efforts and making data-informed decisions to improve hiring
strategies.

Some of the key aspects of the Quality of hire indicator include: how well new employees perform in
their roles. It considers factors such as job-specific skills, productivity, work quality, and overall
contributions to the team and organization; how they align with and respond to the company's values,
culture, and working environment; how long new hires stay with the organization. High-quality hires
tend to have longer tenures and lower turnover rates, indicating that they are satisfied and engaged in
their roles; whether new employees possess the necessary skills and competencies to perform their job
effectively and contribute to the organization's success; how well new hires are onboarded and
integrated into their roles. Proper onboarding and support can significantly impact an employee's
success and overall satisfaction; effectiveness of different hiring sources, such as job boards, referrals, or
recruitment agencies, in attracting top-quality candidates;

Measuring this indicator typically involves a combination of quantitative and qualitative data, including:
performance evaluations and objective performance metrics; employee engagement and satisfaction
surveys; employee turnover and retention rates; time-to-productivity metrics for new hires; feedback
from hiring managers and colleagues; and hiring source analysis and cost-to-hire metrics.

A Guide to People Analytics: HR Metrics that Matter 5

Employee Engagement Score
This score is generally determined through an employee survey that assesses factors such as job
satisfaction, commitment, and motivation.

Engaged employees are typically more productive, better at problem-solving, less likely to leave, and
more likely to be advocates for the company, all of which can lead to improved business performance
and customer satisfaction. Besides, low employee engagement can result in higher turnover rates,
decreased productivity, and poor customer service, all of which can harm the company's performance
and reputation.

By maintaining high engagement levels, companies can foster a positive culture, which can help in
attracting talent, retaining top performers, and achieving business objectives. Regular engagement
surveys and action on feedback, as well as initiatives focused on work-life balance, rewards and
recognition, and career progression opportunities can improve employee engagement. Correlated with
Employee Turnover Rate, Retention Rate, and Employee Satisfaction Index.

High engagement often leads to high satisfaction and retention and low turnover. Misinterpreting this
score is common as high engagement does not necessarily equate to high productivity or performance.
Also, acting on this metric without understanding the root causes of low engagement can lead to
ineffective solutions.

It is typically measured through surveys with questions about job satisfaction, motivation, and loyalty.
The score is usually calculated by averaging the responses on a scale.

Training Cost per Employee

This is the total cost of employee training divided by the number of employees.

It includes expenses such as training materials, external courses or seminars, and the time spent on
training. Investments in employee training can improve skills, increase productivity, decrease error
rates, and improve employee satisfaction and retention, leading to a stronger competitive position.
However, if these costs become exorbitant without corresponding improvements in productivity or
quality, it can impact profitability. Therefore, it's important for HR leaders to ensure that training
programs provide a good return on investment, contributing to the company's strategic goals. Cost-
efficient training strategies may include leveraging online learning platforms, developing in-house
training programs, and optimizing the use of existing resources. Regular evaluation of training
effectiveness can also help ensure good ROI.

This can be linked to Employee Performance, as more investment in training should theoretically lead to
better performance. It's also related to Employee Turnover Rate if frequent training of new hires is

A Guide to People Analytics: HR Metrics that Matter 6

needed. A pitfall here is viewing training as an expense rather than an investment. Cutting training costs
might save money in the short term, but it can hamper long-term growth and productivity.

Training Cost per Employee is the total cost spent on employee training and development divided by the
number of employees trained. This can include expenses for workshops, seminars, online courses, and
training materials.

Absence Rate
This is calculated by dividing the number of workdays missed due to unplanned absences by the total
number of contracted workdays, multiplied by 100. High absence rates can lead to decreased
productivity, overworked remaining staff, poor morale, and lower customer satisfaction. A strategic
focus on reducing absence rates can lead to increased efficiency, improved employee wellbeing, and
better customer service.

Excessive absences can also disrupt workflow, increase the workload for other employees, and lead to
missed deadlines, all of which can negatively impact business performance and customer satisfaction.
Effective absence management strategies can include promoting a healthy work environment,
implementing flexible work policies, and offering wellness programs. This metric can be linked to
Employee Satisfaction Index and Employee Engagement Score, as high satisfaction and engagement
often lead to lower absence rates.

This metric can be misused if companies penalize employees for absences without understanding the
reasons. For instance, if the absence rate is high due to poor working conditions, penalizing employees
could exacerbate the issue.

To measure it, divide the total number of days absent by the total number of available workdays and
multiply by 100.

Employee Net Promoter Score (eNPS)

It provides an indication of overall employee satisfaction and loyalty, which can affect recruitment,
retention, productivity, and customer satisfaction. Focusing on improving eNPS can enhance the
employer brand and contribute to business growth. A low eNPS score may signal a poor work
environment, potentially affecting the company's ability to attract and retain high-quality employees,
impacting overall business performance.

Increasing eNPS might involve regular pulse surveys to understand employee sentiment and areas for
improvement, initiatives to improve the employee experience, and a clear feedback loop to
demonstrate that employee opinions are valued. Correlated with Employee Satisfaction Index and
Employee Engagement Score.

A Guide to People Analytics: HR Metrics that Matter 7

A high eNPS often indicates high satisfaction and engagement. A pitfall here is focusing too much on the
score and not enough on the feedback received. The score is a metric, but the feedback can provide
valuable insights for improvement.

Employee Net Promoter Score measures how likely employees are to recommend their organization as a
place to work. It is based on a single survey question: "On a scale of 0 to 10, how likely are you to
recommend this company as a place to work?" Scores are categorized into Promoters (9-10), Passives
(7-8), and Detractors (0-6), and the eNPS is calculated by subtracting the percentage of Detractors from
the percentage of Promoters.

Average Performance Rating

It is an indicator that quantifies the average level of performance achieved by employees within an
organization during a specific period. It involves assigning performance ratings to individual employees
based on their job performance, typically through performance evaluations or reviews.

To calculate the Average Performance Ratings, sum up all the individual performance ratings given to
employees and divides it by the total number of employees evaluated. For example, if a company has
100 employees, and their average performance rating is 4.2, it means the overall average performance
of the employees falls between "exceeds expectations" and "meets expectations" on the rating scale.

The Average Performance Ratings provide insights into the overall performance level of the workforce. A
higher average rating suggests that most employees are meeting or exceeding performance
expectations, while a lower average rating may indicate that there are opportunities for improvement
and development. In addition, the Average Performance Ratings can be used to identify areas where
employees may need additional training, support, or coaching. It helps HR design targeted performance
improvement plans to enhance the skills and competencies of employees.

While the Average Performance Ratings provide a quantitative measure of overall performance, they
should be used in conjunction with qualitative feedback from performance evaluations to gain a
comprehensive understanding of individual employee performance and development needs.

Performance Rating Distribution

This is the distribution of employee performance ratings, typically on a scale from poor to excellent. It
can help identify performance trends, skills gaps, and training needs.

Fostering high performance across the company can lead to increased productivity, higher-quality
products or services, and better customer satisfaction. Furthermore, an understanding of performance
distribution can help the company align its workforce with its strategic goals, identify areas where
additional training or resources are needed, and ensure that it is well-positioned to meet future
challenges. Regular performance reviews, clear goal-setting, performance improvement plans for

A Guide to People Analytics: HR Metrics that Matter 8

underperformers, and career development programs for high performers can help manage performance
levels across the organization.

This is related to Training Cost per Employee, as better training should ideally lead to better
performance. It is also linked to Revenue Per Employee, as higher-performing employees typically
contribute to higher revenue. Misunderstandings can occur if this metric is used in isolation. For
instance, a company with a high performance rating might have a lenient assessment process, not
necessarily high performing employees.

In traditional performance management, Performance Rating Distribution shows the distribution of

employee performance ratings across different levels (e.g., excellent, good, satisfactory, needs
improvement). It helps identify the performance distribution in the organization.

Diversity Rate
This refers to the variety of differences between people in an organization.

Diversity can include race, gender, ethnic group, age, personality, cognitive style, tenure, organizational
function, education, background and more. A diverse workforce can lead to a broader range of ideas,
promoting creativity and innovation, enhancing problem-solving, and leading to better decision-making
and business outcomes.

Furthermore, diversity can improve the company's image and attractiveness to potential employees and
customers, supporting business growth in diverse markets. A diverse workforce can be fostered by
unbiased recruitment processes, inclusive policies and practices, and diversity and inclusion training
programs.

This can impact Employee Engagement Score and Employee Satisfaction Index, as diverse workforces
often lead to higher engagement and satisfaction. It's also linked to the Company's Reputation and
Employer Branding, as organizations that value diversity are often seen as more attractive to potential
employees. A common mistake is to focus solely on representation and not on inclusion and equity.
Diversity without inclusion can lead to underutilized talent and reduced employee satisfaction.

To measure it, divide the number of employees from underrepresented groups by the total number of
employees and multiply by 100.

Retention Rate
This is the percentage of employees who remain with the company over a given period, usually a year.
Retaining employees can save the company recruitment and training costs, maintain productivity and
morale, and preserve organizational knowledge and skills.

A Guide to People Analytics: HR Metrics that Matter 9

Companies with high retention rates are often more stable, enabling them to pursue long-term goals
effectively. Moreover, strong employee retention can be a sign of a positive work environment and
effective management, both of which can enhance the company's reputation and attractiveness to
potential employees and customers.

Strategies to improve retention may include competitive compensation packages, clear career
progression paths, recognition and reward systems, and regular employee feedback. This metric is
linked to Employee Turnover Rate, Employee Engagement Score, and Employee Satisfaction Index. High
retention usually means low turnover and high engagement and satisfaction.

A pitfall is assuming that a high retention rate is always a positive sign. In some cases, it might reflect a
lack of career mobility, leading to stagnation and reduced motivation.

To calculate it, divide the number of employees at the end of the period by the number of employees at
the beginning of the period and multiply by 100.

Top Performer Retention Rate

This is an important indicator that measures the ability of an organization to retain its high-performing
employees over a specific period. This metric focuses on the retention of employees who consistently
demonstrate outstanding performance, exceed expectations, and contribute significantly to the
organization's success. These high performers are often considered critical assets to the company due to
their exceptional skills, expertise, and overall impact on the organization's performance.

Before calculating the top performer retention rate, organizations need to have a system and criteria in
place to identify top performers. This can be based on performance evaluations, objective metrics,
achievements, or a combination of factors specific to the organization's performance management
system.

Top Performer Retention Rate is a critical metric for HR and organizational leaders because retaining
high-performing employees can directly impact an organization's productivity, innovation, and overall
success. Losing top performers can result in a loss of specialized knowledge, decreased team morale,
and additional recruitment and training costs. A high Top Performer Retention Rate indicates that the
organization is successful in retaining top talent. It suggests that the organization has effective strategies
in place to engage them, leading to their continued commitment to the company.

Organizations use Top Performer Retention Rate as feedback to evaluate their retention strategies and
make data-informed decisions to improve employee engagement and satisfaction. Retention efforts
may include providing opportunities for growth and advancement, recognizing and rewarding high
performance, offering competitive compensation and benefits, fostering a positive work culture, and
ensuring open communication and feedback.

A Guide to People Analytics: HR Metrics that Matter 10

To calculate the Top Performer Retention Rate, follow these steps: Determine the number of top
performers at the beginning of the designated period; Identify the number of top performers who are
still with the organization at the end of the designated period; Divide the number of top performers who
are still with the organization by the initial number of top performers; Multiply the result by 100 to get
the percentage.

That is: (Number of Top Performers at the End / Number of Top Performers at the Beginning) x 100

Revenue Per Employee

This is calculated by dividing total revenue by the total number of employees. It provides an indication
of employee productivity and the efficiency of labor utilization.

Higher revenue per employee indicates a more efficient and profitable organization.

By focusing on maximizing this metric, HR can contribute to improved financial performance and
growth. This metric is also a key indicator of organizational efficiency, so if it's low, it may signal the
need for productivity enhancements or workforce adjustments. Ways to boost this metric could involve
improving productivity through training and development, optimizing work processes, and investing in
tools and technologies that enhance efficiency.

This is linked to Performance Rating Distribution and Training Cost per Employee, as better performance
and training often lead to higher revenue per employee. It's also linked to Workforce Capacity, as
optimal capacity can improve revenue generation. A potential misuse of this metric is to drive
employees to work longer hours to increase productivity, which can lead to burnout and decreased
productivity in the long run.

Revenue Per Employee is calculated by dividing the total revenue generated by the company during a
specific period by the average number of employees during the same period.

Employee Satisfaction Index

This is a measure of how satisfied employees are with their jobs, often assessed through surveys.
Satisfied employees tend to be more productive, committed, and loyal, leading to benefits like lower
turnover, higher customer satisfaction, and better business performance. Additionally, a strong
Employee Satisfaction Index can make the company more attractive to potential hires, supporting
recruitment efforts.

Regular employee satisfaction surveys, initiatives to improve work-life balance, and clear
communication around company policies and changes can enhance employee satisfaction. Correlated
with Employee Engagement Score, Retention Rate, and Employee Turnover Rate.

High satisfaction typically means high engagement and retention and low turnover.

A Guide to People Analytics: HR Metrics that Matter 11

It is important not to view satisfaction as an end in itself. Satisfied employees are not always productive
or engaged. Actions should be taken to ensure satisfaction leads to increased productivity and
performance.

Employee Satisfaction Index is a composite score that measures overall employee satisfaction with their
job, workplace, and the organization. It is often calculated based on employee surveys and feedback.

Leadership Ratio
It sometimes is used interchangeable with Span of Control (even though they mean different things, but
provide related information). This is the ratio of management to non-management employees. A
suitable ratio helps ensure effective management without unnecessary costs or bureaucracy.

An appropriate leadership ratio can also contribute to employee satisfaction and productivity by
ensuring adequate support and direction without excessive micromanagement. It also helps maintain
communication and decision-making efficiency, which can support the effective execution of business
strategies. A suitable leadership ratio can be maintained by having clear succession planning in place,
investing in leadership development programs, and ensuring an adequate support system for all
employees.

This can impact Employee Satisfaction Index and Employee Engagement Score, as appropriate
leadership ratios can enhance satisfaction and engagement. It's also related to the Performance Rating
Distribution, as effective leadership often leads to better performance. A common misunderstanding is
that a lower ratio (more leaders) always leads to better results. Too many leaders can lead to confusion
and inefficiency, while too few can lead to inadequate supervision and support.

It can be calculated by dividing the number of leaders by the total number of employees and multiplying
by 100.

Span of Control
This indicator refers to the number of employees or direct reports that a manager or supervisor is
responsible for overseeing and managing within an organization. It is a critical HR indicator that helps
determine the organizational structure's effectiveness and the distribution of authority and
responsibility across different levels of management.

The span of control within an organization can either be wide or narrow, and it impacts the efficiency,
communication, and decision-making processes within the organization. The number of employees
managed by a supervisor can significantly influence the manager's ability to provide guidance, support,
and individual attention to their subordinates.

In a wide span of control, a manager oversees a larger number of employees or subordinates. This may
indicate that the organization has a flatter hierarchical structure, with fewer levels of management, or

A Guide to People Analytics: HR Metrics that Matter 12

that the organization does not have a high leadership ratio. Managers with a wide span of control have
more direct reports, which can lead to a more efficient decision-making process and faster
communication within the organization. However, there is a risk that managers may have less time to
provide individual attention to each employee, which could impact performance and engagement.

In a narrow span of control, a manager oversees a smaller number of employees or subordinates. This
indicates a taller hierarchical structure with multiple levels of management, or a higher leadership ratio.
Managers with a narrow span of control have fewer direct reports, allowing them to provide more
personalized attention, support, and coaching to each employee. However, a narrow span of control
may result in slower decision-making and communication processes within the organization.

The choice between a wide or narrow span of control depends on various factors, including the nature
of the organization, its size, complexity, and the management style and preferences of its leaders. Some
considerations for determining an appropriate span of control include: 1) Nature of the Work: Complex
or specialized roles may require a narrower span of control to ensure that employees receive adequate
supervision and guidance; 2) Employee Competence: A manager's ability to effectively manage a larger
team depends on the competency and experience of the employees; 3) Communication and
Coordination: The organization's communication and coordination needs influence the optimal span of
control; 4) Managerial Experience: Experienced managers may handle a wider span of control more
effectively than those who are less experienced; and 5) Organizational Culture: The organization's
culture and leadership style may influence the preferred span of control.

Skills Gap
This is the difference between the skills that employers need to achieve their business goals and the
skills that their employees possess. Identifying and addressing skills gaps can enhance productivity and
innovation, foster employee growth and development, and maintain the company's competitive
position in the market.

Besides, if a skills gap is left unaddressed, it can lead to missed opportunities, inefficiencies, and
decreased competitiveness, hampering business growth and development. Regular skills assessments,
training and development programs, and partnering with educational institutions can help close skills
gaps. Linked to Training Cost per Employee, as addressing skills gaps often involves training investments.
It can also impact Performance Rating Distribution, as a workforce with a smaller skills gap typically
performs better.

A common pitfall is focusing on existing skills gaps without considering future needs. The skills gap
analysis should align with the strategic direction of the company to ensure future competitiveness.

It can be assessed through employee assessments and performance evaluations.

A Guide to People Analytics: HR Metrics that Matter 13

Overtime Hours
This is the number of hours employees work beyond their regular work hours. It is important for
managing labor costs and employee wellbeing.

High overtime can increase costs and risk burnout, while low overtime could suggest underutilization.

Balancing overtime can help manage costs, maintain employee satisfaction, and ensure productivity.
Consistently high overtime may indicate understaffing or inefficient work processes, both of which can
negatively impact productivity, employee morale, and ultimately, customer satisfaction. It could also
lead to higher operational costs and potential legal issues, affecting the company's bottom line and
reputation. Balancing workloads, optimizing work processes, and hiring additional staff or adjusting shift
schedules where necessary can help manage overtime.

This can be linked to Employee Satisfaction Index and Employee Engagement Score, as excessive
overtime can lead to decreased satisfaction and engagement. It's also related to Workforce Capacity, as
optimal capacity management can reduce the need for overtime. A common mistake is considering high
overtime as a sign of dedication or productivity. Prolonged periods of high overtime can lead to burnout,
increased errors, and lower productivity in the long run.

It can be measured by tracking time and attendance records.

Salary Competitiveness Ratio (SCR)

Sometimes it is interchanged with “Market Ratio.” This compares the average salary at your company to
the average in the market for similar roles. A competitive SCR can help attract and retain top talent,
ultimately supporting business goals by ensuring the company has the necessary skills and experience to
succeed.

If the company's salaries are not competitive, it may struggle to attract and retain top performers, which
could hinder its ability to compete effectively, achieve its goals, and maintain customer satisfaction.
Regular benchmarking against industry standards, clear pay structure and transparency, and
performance-based rewards can help maintain a competitive SCR.

This metric is linked to Employee Turnover Rate and Retention Rate, as competitive salaries can
contribute to low turnover and high retention. It's also related to the Quality of Hire, as competitive
salaries often attract higher-quality candidates. A potential pitfall is assuming that higher salaries alone
will attract and retain talent. While important, other factors like career development opportunities,
benefits, and work culture also play significant roles.

A Guide to People Analytics: HR Metrics that Matter 14

Benefits Utilization Rate
This is the percentage of eligible employees who are utilizing each benefit. High utilization rates can
indicate that the benefits offered are valued by employees, which can aid in recruitment and retention
efforts, improve job satisfaction, and enhance productivity.

Conversely, low utilization might suggest that the benefits package needs to be reevaluated and
potentially redesigned, which could lead to cost savings for the company and increased satisfaction for
employees. Regular surveys to understand employee preferences, communication around available
benefits, and regular reviews of benefits offerings can improve benefits utilization.

This can impact Employee Satisfaction Index and Employee Engagement Score, as employees who utilize
and appreciate their benefits tend to be more satisfied and engaged.

A common mistake is thinking that low utilization is always bad. Some benefits, like employee assistance
programs, might have lower utilization but provide significant value to those who use them.

Career Path Ratio

This ratio compares the number of internal promotions to external hires.

A high ratio can indicate that there are clear advancement opportunities within the company, improving
employee morale and retention, and contributing to business continuity and institutional knowledge.
Promoting from within can also be more cost-effective and less risky than hiring externally, as the
company already knows the employees' abilities and fit with the company culture.

Clear internal mobility policies, internal job boards, and career development support can help improve
this ratio. Linked to Employee Engagement Score and Retention Rate, as clear career paths often lead to
high engagement and retention.

It can also impact the Leadership Ratio, as internal promotions often fill leadership roles.
Misinterpreting this ratio is common. A high ratio (more internal promotions) isn't always positive if it
leads to a lack of new ideas. A balance between internal promotions and external hires is often
beneficial.

A Guide to People Analytics: HR Metrics that Matter 15

Human Capital ROI
This is the return on investment in human capital, calculated by dividing total workforce costs into the
company's revenue. A higher ratio indicates that the company is using its human capital effectively,
which can enhance profitability and provide a competitive advantage.

If this ratio is low, it could signal inefficiencies in labor utilization or issues with workforce productivity,
which might require strategic interventions from HR to address. Investment in employee development,
strategic workforce planning, and effective talent management can enhance Human Capital ROI. This is
linked to many of the other metrics, such as Training Cost per Employee, Revenue Per Employee, and
Workforce Capacity, as all these factors can impact the return on investment in human capital.

A potential misuse is viewing human capital solely in monetary terms. This can lead to decisions that
improve the ROI in the short term but negatively affect employee morale and retention in the long term.

For example, in the simplest way, it can be measured by comparing the benefits of employee
development and performance to the costs associated with it.

Workforce Capacity
This measures the volume of work the workforce can produce, often assessed in terms of full-time
equivalents (FTEs). Adequate capacity is crucial for meeting business demands and achieving strategic
goals.

Managing capacity effectively can ensure operational efficiency, customer satisfaction, and business
growth. If capacity is not aligned with demand, it could lead to overwork, stress, burnout, and turnover,
or alternatively, underutilization and unnecessary labor costs.

HR plays a crucial role in monitoring and managing workforce capacity to align it with the company's
strategic goals. Regular forecasting of labor needs, cross-training employees to enhance flexibility, and
hiring temporary staff during peak periods can help manage workforce capacity.

This metric is linked to Revenue Per Employee, as optimal capacity management can maximize revenue.
It's also related to Overtime Hours, as under or overcapacity can lead to excessive overtime. A pitfall is
to push for maximum capacity utilization without considering employee wellbeing. This can lead to
burnout and decreased productivity over time.

A Guide to People Analytics: HR Metrics that Matter 16

Leading Indicators
Leading indicators in HR are proactive measurements that predict the future health of an organization's
workforce and the impact in the business strategy and the achievement of business goals and priorities.

These kinds of indicators in HR offer critical, forward-looking insights that have the potential to shape
future performance in two ways: preparing the organization for existing trends (both internal and
external to the organization) and, hopefully, also by giving them information to act swiftly when
confronted by data that tells a story that may negatively impact the business.

By evaluating these key performance leading indicators, HR professionals and business leaders can
manage issues and opportunities even before they significantly impact the organization.

The truth is that the impact of leading indicators goes far beyond HR. They are touching every corner of
the organization: strategy, performance, culture, leadership and more. Equipped with the insights
offered by leading indicators, decision-makers across an organization can craft data-informed strategies,
enhance operational efficiency, improve employee engagement, and, overall, focus on improving both
people and business operations by addressing issues with culture and performance.

Ultimately, leading indicators are essential to drive sustainable organizational growth and
competitiveness through both culture and performance. Understanding, embracing and acting on the
information provided by HR leading indicators in real-time allow the strategic redirection of efforts,
mitigating risks, and maximizing opportunities in a timely and effective manner.

There are many relevant HR leading indicators.

They include: Employee Satisfaction Survey Scores, Workload Capacity, Training Participation Rate,
Internal Mobility Rate, Employee Pulse Surveys, Early Turnover Rate, Employee Feedback Frequency,
Career Development Plans Completion Rate, Number of Employee Referrals, Employee Net Promoter
Score (eNPS), Candidate Experience Score, Pre-Onboarding Engagement Rate, Diversity in Leadership
Pipeline, Skills Gap Analysis, High-Performance Succession Rate, Percentage of Open Positions Filled
Internally, Leadership Satisfaction Score, Employee Wellbeing Index, Frequency of Performance Check-
ins, Talent Acquisition Cost Ratio, Upward Feedback Scores, Employee Empowerment Index, Cross-
Training Participation Rate, Employee Innovation Contributions, Percentage of Performance Goals
Achieved, Frequency of 1:1 Manager-Employee Meetings, Level of Job Postings per Open Position,
Workplace Safety Incident Rate, Mentorship Program Participation Rate, and Employee Volunteer
Program Participation Rate.

The following pages include five of them.

A Guide to People Analytics: HR Metrics that Matter 17

Employee Satisfaction Survey Scores
These surveys provide HR departments with insight into overall employee experience, engagement,
satisfaction, and morale. They can be instrumental in identifying areas that need improvement.

Employee satisfaction is typically measured through confidential surveys conducted on a regular basis
(annually, bi-annually, or quarterly, or even pulse surveys). These surveys usually contain a set of
questions that help understand how satisfied employees are with various aspects of their job - their role,
work environment, management, compensation, benefits, work-life balance, etc. The scores are
typically averaged to create an overall employee satisfaction score.

High scores can result in increased employee engagement, higher productivity, better retention, and a
positive company culture. Low scores can indicate disengagement, dissatisfaction, and potential
turnover. This can lead to reduced productivity, a negative work environment, and potentially high
recruitment and training costs.

Early Turnover Rate

Keeping an eye on the early turnover rate can help HR identify issues with the onboarding process or
overall job fit. This is typically calculated by dividing the number of employees who leave the
organization within a specified short period (for example, one year) from their date of joining by the
total number of employees who left during that same period. The result is then multiplied by 100 to get
a percentage.

A low early turnover rate suggests successful onboarding and initial job fit, contributing to long-term
retention and reduced hiring costs. A high early turnover rate is a strong indicator of issues with the
hiring process, onboarding, or job alignment, which can lead to high hiring and training costs, as well as
decreased productivity.

Training Participation Rate

This is a key measure of how engaged and committed employees are to their personal development and
learning new skills, both of which are crucial for business growth. This is calculated by dividing the
number of employees who participate in non-mandatory and mandatory (separate measurements)
training programs by the total number of employees in the organization. This can be done for specific
training programs or for all training initiatives over a certain period. In addition, this can be analyzed
further by weighing the quality of the programs measured in a rated scale and the impact it had on the
behaviors and actions of training participants.

High participation rates can indicate an engaged workforce with a strong commitment to skills
development and continuous learning. This can lead to improved productivity and innovation. Low

A Guide to People Analytics: HR Metrics that Matter 18

participation rates can signify a lack of engagement or potential issues with the training offerings. This
can result in skills gaps, decreased productivity, and low innovation.

Employee Net Promoter Score (eNPS)

The eNPS measures how likely employees are to recommend their workplace to others, offering a
snapshot of employee satisfaction and loyalty. eNPS is calculated using responses to this sample
question, "On a scale of 0-10, how likely are you to recommend this company as a place to work?"
Respondents are grouped as follows: Promoters (9-10), Passives (7-8), and Detractors (0-6). The eNPS is
then calculated by subtracting the percentage of Detractors from the percentage of Promoters.

A high eNPS means employees are likely to recommend the organization as a great place to work. This
can enhance the employer's brand and attract top talent. A low eNPS can harm the employer's brand,
making it more difficult to attract and retain talent. It may also be an indicator of underlying issues that
need to be addressed.

Percentage of Open Positions Filled Internally

This metric can tell HR a lot about the effectiveness of their talent development and retention
strategies. High rates can indicate successful internal growth and development programs. This is
measured by dividing the number of open positions filled by internal candidates by the total number of
positions filled during the same period. The result is then multiplied by 100 to get a percentage. This
reflects the effectiveness of internal mobility, talent development, and succession planning programs.

A high percentage signifies successful internal mobility and talent development programs. It can lead to
increased employee satisfaction, improved retention, and reduced hiring costs. A low percentage can
indicate a lack of career development opportunities, potentially leading to dissatisfaction and turnover,
as well as increased hiring costs.

A Guide to People Analytics: HR Metrics that Matter 19